The Importance of Data in Consumer Cannabis with Jocelyn Sheltraw

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Hello, everyone, and welcome to Distru Podcast. Today we have Jocelyn from Headset. She's an awesome vibrant person and really excited to have her in the industry and excited to have her on this podcast. Jocelyn, do you want to start with giving a little introduction about yourself?

Jocelyn: Yes, absolutely, Blaine. What's happening? Thank you for having me. I'm about two years into the cannabis industry. At Headset I run our California strategy and operations, as well as our new market expansion. Really what that means is that I'm focused on working across all sides of the supply chain and educating partners on the data that we're finding, the technology solutions that we have available to them.

But what really led me to this and led me to the cannabis industry is my background coming from ad tech. I started working in mobile the year of the iPhone. Much like cannabis, it's a very parallel journey. It's a new industry, new technology, figuring out this wild west of its ways. I knew, after spending my whole career working in ad tech, that I needed a change. I had been working in the ad industry for 10 years.

I decided to take four months off and figure out what I wanted to do next. But I always had this idea, I knew that I wanted to get into cannabis, because I am a longtime cannabis enthusiast. I really was interested in replicating the ride that I had in ad tech. As luck would have it, I was introduced to Sy Scott, our CEO and co-founder from a mutual contact in the ad tech world. We just kept in touch over a few year period.

Then when I took some time off and left ad tech, I hit Sy up and said, “Okay, I'm ready to join the cannabis industry.” He needed someone to launch California and get this market off the ground. All the stars just really aligned for me to get into the industry. I'm just so grateful because I feel like I can bring in a lot of that past skillset that I had in ad tech and help us navigate this new industry that still feels like that wild west of an industry.

Blaine: Yeah, it is definitely the wild wild west out here. Cool. That was an awesome breakdown. I love that journey. Do you want to educate the audience on what Headset is and what you do and what that provides to the industry?

Jocelyn: Absolutely. You can think of Headset as a data company that serves different parts of the industries through software. It's funny because, okay, I'm two years into the industry, and it's taken me up until the last six months to really figure out how to communicate what we do because it can seem a little bit overwhelming and also so broad when you just say data. What does this really mean?

I want to break down our ecosystem, and this will give you also an idea of how we collect the data. Because oftentimes in the media or in the market, we're very well known for all of these beautiful reports and these analysis that we put out, but it's really important for anyone in the industry to ask the question of, how is the data collected and how does your ecosystem work?

What Headset does is we provide three different softwares to different parts of the supply chain. Our first platform is called Retailer. What this does is it plugs into a dispensary point of sale system and then injects all of that data in real time and it turns it into very actionable reports for the retailer, to understand their inventory management, to have a good view of their sales staff and how they're performing.

Perhaps maybe a budtender has more affinity to selling a particular product or a category. Using that information to be able to educate other sales staff or hiring that or having that sales person on a particular vendor day, in which they know that category really well, using this information for benchmarking. Looking at what's happening in the retailer store and comparing that to the state of California, for example, so that they can start to ask more questions.

Maybe their store is selling 10% of pre-rolls, but California’s sales pre-rolls are at 20%. Then they can ask those questions. Okay, how come we aren't selling more pre-rolls? What can we do to sell more pre-rolls? Clearly they're popular in California. We're providing all these really detailed analytics for the dispensary's own point of sale data.

One of the reasons that retailers are really working with Headset is because point of sale systems, they haven't really built out these deep analytics for several reasons. One, this is a very new industry for many people to which we are just now seeing people from these more traditional technology backgrounds come in and build more advanced solutions for cannabis. Headset having been around for five years, we've really built this sophisticated platform that retailers are finding very valuable.

That's the first platform. First platform Retailer, that's servicing the retailer just to understand their own shop data. The second platform is called Bridge, and what this does, this is built for the brands. The brands need to see all their real time sell through rates and dispenser rates, because then the sales teams need to know which accounts to call on, essentially to eliminate any out of stock event. But also, the brands need this visibility to be able to do enhanced trend forecasting. They need to know what products they need to continue to make based off of market demand.

Then the third platform is called Insights. This is what you probably see most in the media. This is where we take all of that point of sale data and we aggregate it, we anomolize it. Meaning we get rid of any privacy information. Then we put that data into our Insights platform, and any producer or person across the supply chain can log in and they can see visualizations and reports for what products, what categories, what brands, all trending in real time. The people that are using this are commonly retailers, the brands themselves wanting to know what products to continue to make, where there may be white space in the market. Then of course, investors who are wanting to understand what the market is looking like.

Blaine: Cool. That was a great breakdown. We know people are using the Headset bridge product to see those real time inventory levels of retailers and the insights. I personally use the Insights product a lot, love seeing that sales analysis. That leads me into the question because, your analysis, I love that you guys break out the data in different ways.

You're really big on basket size and these different types of interesting insights. I'd love to know some of the more interesting insights that you've seen that you've created for the industry, as you've been at Headset.

Jocelyn: Okay. One of my favorite analysis is this analysis that we did in early February, where we were looking at strain data. I think this is personally very interesting because, being a long time cannabis enthusiast myself, strains were really one of the most sacred parts of cannabis. A lot of people would identify with these strains. Jack Herer is the best or Blue Dream, whatever it may be.

We report a lot on all these great analysis on, yeah, basket analysis, like you mentioned or what demographics are purchasing what types of products. But what I really thought was interesting was what do strains look like as we're seeing this shift away from strains and into more effect-based selling. Being a longtime cannabis enthusiast, I personally have an interest in seeing strains and Appalachian-based strains becoming more of a part of our conversation and not just this focus on an effect, though I want to have more energy or I need something because I really enjoy the part of cannabis that is that craft cannabis side.

One of the things that we found from this and that I thought was really interesting for California is that the top 10 strains in California make up about 14% of the sales. Strains are important, they're very important, but we are seeing the shift into more effect-based selling.

The reason that I think this is all really interesting is because strains are so nebulous than why they're popular. We don't have enough data in cannabis as a whole to say that a particular strain or that terpene within the strain may produce an effect. Some of the stuff is just simply marketing. I think it's really interesting to just take a step back and look at, okay, what are these top strains? Then using this data to ask more questions of like, why is that top strain so popular? Will that continue to be the case? Or what does it look like as a strain becomes more mature? Are the strains just as important or does it shift more into this effect-based selling?

What we see from the data is that that is, in general, the case. We see that some of these older, more mature markets, primarily markets like California that have this long history of medical back in ‘96, also Washington is another market that we see strains being really important in. We can see that these markets versus some of the new markets that are coming online. I'm very curious to see what happens on the East Coast and Massachusetts. Do they still have the same interest in the strains or is it that effect-based selling?

When we're looking at this, we can see from California, like I said, our top 10 strands are making up 14% of ourselves here in California. Whereas we look at a newer market like Canada, so Alberta, Canada, or British Columbia, we see that their top 10 strains are actually making up that 28% to 25% of their market. That's probably for a couple of reasons. They don't have as much product diversity, so when you're in a market like California, where we've got a thousand unique brands here, versus Canada, which doesn't allow all the categories, I think we can start to ask them interesting questions from that data. If you're curious, our actual top strain in California is Purple Punch, which quite surprised me…

Blaine: What?

Jocelyn: Because I am less familiar with Purple Punch. I would've thought it would've been more like Jack Herer or Blue Dream, but it is Purple Punch.

Blaine: I'm shocked by that. I thought it would be Blue Dream for sure or Green Crack or something like, I don't know, something like that. That's interesting.

Jocelyn: Yeah. Blue Dream is Colorado's top selling strain. Wedding Cake is Washington's, and Jack Herer is Oregon’s.

Blaine: The question for me is the same thing as you. I think we're almost at the beginning of a long term shift of where this is going because anecdotally, when I smoke cannabis and I get Blue Dream then Blue Dream then Blue Dream, I feel like the effects are wildly different. Getting that Appalachian, this strain from this farmer gives you this effect, is where I'm excited to go. We stock just Blue Dream and energy, because I smoked crème brulee and I got it from four different farms and I feel like I got different effects every single time. I feel like we just have a lot of time we need to go through to let these farmers figured out, start to be more transparent with how they market things. Yeah, it's going to be a while though until it gets there.

Jocelyn: It's like the wine industry and comparing it to the beer industry. Being able to have all the nuances of how it's grown. There's so much that goes into cannabis. I think for many of us long time enthusiasts, we really want to see that continue to be at the forefront of conversation because it really brings cannabis back to the fact that it is a plant, as opposed to a consumer packaged goods, which it is a consumer packaged good.

But it is still a plant that serves many different purposes to many different types of people. I think it's important to remember that it is a plant and not just an effect that you want to feel.

Blaine: Yeah. Totally agree. I want to go in a different direction with the data stuff because there's one thing that you guys put out that I don't see anyone else putting out that I always think is fascinating, is gender based analysis as well. I loved when it was Valentine's Day and you showed that females are buying way more than males on that day. It really leads me into, what kind of segments of people are you most interested in? Elderly, females buying gifts? What trends are you interested in there?

Jocelyn: Okay. In terms of the interests that we get, I'll say from our customers as opposed to me personally, it really is understanding different demographic groups. So yes, what are the purchasing patterns of senior citizens versus millennials versus gen Z? I think it's really interesting to look at, especially gen Z, because these are people that are born 1990 and after. These are people that just now are starting to turn of age, turning 21. This is the new demographic that's coming into the market.

I think it's really interesting to look at their purchasing patterns. One of the things that I found interesting, which was a little surprising to me, is that gen Z in terms of flower sales, loose flower, those sales are declining for gen Z, but that tends to be for senior citizens and for older demographics one of the most common ways to consume. That makes sense. That older people grew up in cannabis being a smokable flower, so they're used to consuming in this way.

Where we see gen Z coming in and their mindset is more focused on discretion, health and wellness, which there is perception that vaping, for example, may be healthier than an inhalable flower or a pre-roll. What we see is that flower sales are going down for gen Z, but their most popular ways to consume are vapes and pre-rolls. Which pre-rolls make sense to me; even though it's a flower and it's lightable, inhalable, it's about sharing and passing it around. That makes sense with gen Z.

But I think it's really important to look at these different trends within the demographics. Then if you're a brand, really think about, okay, how do we target that particular demographic? Because what I see is sometimes brands are just trying to be everything to everyone. I'm very curious if some brands were to be a little bit more specific to that demographic that they want to target, if they would be able to stand out more in this very saturated landscape.

Blaine: Yeah, I agree. I think you're starting to see that more though. It leads me into beverages, because I think those beverage companies that are coming out are a good example of companies that are like, I'm targeting a certain profile. I want to target the gen Z that we think will drink cannabis instead of just smoke it or things like that.

By the way, I’m curious specifically about that segment. Actually, so many beverage companies have come up in the last two years. I just want Jocelyn's input, not even the data. Do you believe a product like that is going to take over how people consume?

Jocelyn: Okay. This question is so funny to me because I'm asked this question all the time and then I've started asking all of my network throughout the supply chain their thoughts on beverages because beverages are one of those categories that everyone has an opinion on. At Headset and my opinion, we're very stoked on the potential of beverages. I am seeing more and more beverages coming to market, but we don't see the sales necessarily there.

In California or in actually all of the markets that Headset reports on, so California, Colorado, Washington, Nevada, the newbie Oregon, we're seeing that beverage sales are less than 1% of the overall market. It's a very, very small portion, but we're starting to see it talked about a lot more in the media. We're starting to see more investors come in. We're seeing the major CPG brands get into cannabis beverages.

I'm stoked on beverages and think there's a future for them, and I always ask this question, well, why are sales so low? I think it comes down to a couple of things. The reason that people may be bearish on beverages, is because beverages are really hard to sell. If you're at a retail shop, one, sell staff, they don't really understand them yet. Two, traditionally they haven't tasted that great. We're seeing a lot of product innovation and we're seeing that adjusted.

Also, the THC levels, it's not as controllable. We see people having more of a negative experience if they get too high. Then also at a retail shop, it takes a lot of real estate for a beverage, right? Then they have to have, yeah, the fridge. There’s a shorter shelf life. There's all these challenges that a retailer faces when selling a beverage. I think that's the big part of what's holding beverages back from becoming more popular.

I don't think it's that people aren't interested in consuming them, I think it's just that we haven't, as an industry, figured out really how to market them. Okay, one of the things that's been really interesting to me to watch with beverages during all this COVID-19 is that we've seen beverages become one of those categories that’s seeing a lot of growth. We've seen declines in pre-rolls, but we've started to see increases in edibles and beverages.

In particular, we were looking at Lagunitas Hi-Fi Hops and their beverage sales two Mondays ago. When we were looking at... we looked at four consecutive weeks on Mondays at their data, and we saw that they had sales increases of 70%, compared to an average Monday. We wanted to keep an eye on this throughout COVID because one of the things that we're wondering is how are people shifting the ways that they consume with all of this going on?

I think a safe assumption to make is it's probably less harsh on the lungs and you don't have to have as much hand to mouth interaction. It maybe is a little safer in transmission. But yeah, I'm still stoked on beverages. I'm really happy to see more innovation happening. I'm really happy that they're tasting better. I personally do not consume beverages as much. I'm a flower girl, but I'm very stoked to see the growth in them because I think beverages are going to be a way of greater socialization.

As cannabis consumption lounges become allowed in more States and more municipalities, I think beverages are going to be a really great way for people to continue to slowly enjoy something, as opposed to continually passing around a joint. I think it's going to have more social interaction for us through beverages, so I'm stoked to see what that brings.

Also, I think one of... from a socialization standpoint, I think there's some data out there saying, people feel more comfortable when they can hold a drink in their hand, when you're socializing. I think cannabis beverages are going to be a way of getting people, if they so choose to diminish their alcohol use, gives them another alternative to that and still those social needs of wanting to hold something in your hand or just still being able to consume without it being as invasive maybe as flowers.

Blaine: Yeah. I agree. I love that little psychological thing you do at the end. I think that holding in the hand and the experience is really interesting. We haven't even started to explore cannabis social environments, though, because of regulation. It's like, we're so young as an industry. We don't have cafes yet, and when you go to Amsterdam, it's a cafe, it's an experience in itself. We're having some, but it's not there yet, not at the bar level obviously.

Jocelyn: But I think it's starting to happen with our cannabis community. We're often meeting up at mow greens or vapor room. I'm seeing a ton of cannabis folks start to come together and just hang out at consumption lounges. I think as more of society and more cities open up and allow consumption lounges, then it is going to be comparative to going out to a bar and meeting people. That's why I'm just so excited about what beverages can bring in that regard because as for me personally, I'm really interested in socializing with people outside of alcohol-driven events.

Blaine: Yeah. I couldn't agree more. Yeah. I'm totally in that world, but I want to see it hit the rest of the mainstream. You actually touched on a topic which is pretty important, and I do want to dive into it more, which is COVID or coronavirus. I'm sure a lot of our listeners would be interested in hearing more about that.

We've seen some initial reports, and I did read your report and read your webinar about the initial Bumbo sales when the virus was announced and shelter in place was announced because people were stocking up. But I'd love for you to give your two cents on where coronavirus is at, how it's affecting sales, and how you see that affecting the long term of the cannabis industry.

Jocelyn: Over the past two weeks, our analytics team has obviously been monitoring these trends every day. We're publishing a blog where we're looking at all of the markets that heads that reports on, and then we publish any unique findings. Just in general, as a baseline to start this conversation, here's what we saw in all the States that we're reporting on.

That basically, as soon as they implemented or the mayor announced some type of shelter in place or stay at home order, we saw that there was a correlation between people going out and doing those last minute purchases. Sales in all of these markets were essentially comparative to what a retailer would see on 420. 420 is the biggest sales day of the year, right? For that to happen so quickly was a bit surprising to us.

But what we wanted to see is what happened after that. Were people going out and purchasing, stocking up because they thought that they weren't going to be able to go out again because cannabis potentially was not going to be deemed as an essential business, therefore, they wouldn't be able to have access to it? Or are people consuming more? I think this is a big question that I'm looking for an answer to.

But what we thought is that, yeah, now that cannabis is deemed as an essential business in most of the States that we’re reporting on, the sales spiked as soon as that order went to effect. But then they mellowed out and they essentially went back to normal levels two days after. That was across the board in all the States. We don't have any inferences that we can make in terms of, are people simply consuming more or are they just wanting to stock up because they don't want to have to make as many trips. To be determined all that, we’re in three weeks of data at this point. That's been interesting to watch.

The other thing that I think has been interesting to watch from a data perspective is looking at inventory levels. When we look at Nevada, for example, because Nevada is a tourism state like Clark County, the County that Las Vegas is in, Clark County made up about 80% of Nevada’s entire cannabis retail sales. As I'm sure you can imagine, when Las Vegas is not seeing nearly as many visitors and Clark County make up 80% of their sales, that means that there's going to be a lot more inventory on hand because there's a lot less sales that are happening.

Nevada was an outlier there, but what we saw in California, Colorado and Washington is that, as the shelter in place orders go into effect, a big question is, what does the supply chain look like and is there going to be enough supply to service this potentially increased demand that's happening?

From a data perspective, what we saw in California is that the average retailer in California would have about 4.7 weeks of supply on hand. Then over the past couple of weeks, we've seen that that's now at 3.3 weeks of supply. There's definitely decreased supply that they're having or inventory on hand. I'm not saying that this is going to be supply shortages. I really have no full insight onto that. It's just interesting to see how quickly inventory--

Blaine: Yeah, I think that's the reality of the answer is that, hey, we saw a spike, we're tracking things, nothing crazy yet. It's really just wait and see. The biggest thing on my mind is, how's this going to affect discretionary spending in the long term, with restaurant layoffs and waiting layoffs? How will that affect cannabis sales in the long term if unemployment continues at the trend it's at?

Jocelyn: Like is it recession-proof like alcohol and these other kinds of industries? Is that what you’re talking about?

Blaine: Yeah, exactly. This is putting you on the spot, but do you know the income discrepancies for the income brackets of sales? That might be a super specific data point.

Jocelyn: No. I mean, it's not a super specific data point. We're not reporting on that in aggregates. Like I said, in terms of our insights platform, we scrub all of that data. We're just reporting on product skew level data. We report on the consumer data through a loyalty program via the point of sale system, but they're not even collecting that level of data.

I would love to talk to whoever is collecting that level of data at scale. I think that's really interesting… That's where we need to get to as an industry ultimately is being able to pair in that data and have that full picture of, okay, well, who is the consumer? But based off of all these other data points like income and stuff like that. But yeah, I unfortunately do not have any answer.

Blaine: Yeah. Even if you gave a number, it's like really who is actually collecting that data, and I don't think there is an answer to that. Cool. Well, thanks for the summary on coronavirus. I want to get into one last topic though, which is actionable advice for our customer segment. We work with brands, manufacturers, and distributors, and there's various levels of sophistication. Some are moving or using your Headset bridge platform to see real time inventory levels and use your insights platform to see trends.

There's a lot that aren't leveraging data to its fullest. If you had some key tips or takeaways that a manufacturer, a distributor, or a brand could take in terms of how they could leverage data, what would you say to them?

Jocelyn: Keep it simple. One of the biggest learnings that I personally have had, and this is also one of the biggest things that I've been trying to figure out how to communicate, coming from my past ad tech background, for some reason we would always try to use all this marketing jargon and make things sound so much more complicated than they are. The more complicated, the better that technology must be, the more sophisticated that solution must be.

Well, where we are in cannabis is we need to plain talk about it. We need to be very upfront and direct because we're dealing with a very different mentality, and rightfully so. When have been in this industry and with medical being here since ‘96, these are a lot of our legacy people that have really built this industry, and they weren't free sharing data. They couldn't. They wouldn't even keep receipts and stuff. They just couldn't do that.

One of the things that I see and that I try to do is just plain talk stuff and just be very transparent. That's another thing I think our industry needs as a whole, collaborative effort in sharing information, transparency about information. When I talk about Headset now, I'm always trying to be as direct as possible. This is the value that you get from it, this is why I want you contributing your data, this is how it's going to help you. It's just straight talk.

I see a lot of this big, broad marketing jargon speak, and I just don't think that's resonating well because it's not who our client is. I just wonder if we have more of these conversations with all of our industry leaders and people who are building emerging and new technologies or these new brands and stuff. If we just straight talk it, where would that leave us? I think it’ll just be more fruitful conversations.

Blaine: Yeah. I totally agree. I mean, I think that's even a tip for any industry honestly, just be straight to the point. More corporations come in, we don't want to become that. We want to become that wannabe. No BS, raw, we're building this industry together, let's talk about it. Let me take it in a different direction, keep it simple. I do want to keep it a little bit actionable. If you're maybe a smaller brand that makes your own products and sells them, who in an organization should be leveraging data? Is it the sales manager, the sales reps, the marketing people? Who do you think should always be looking at this type of data?

Jocelyn: Honestly, all departments. When we were first having this conversation with an organization, our sales team would generally or myself would generally have it with one division within an organization. What we saw is that data's good when it's used for a full picture, right? But if only one part of that organization is having access to sell through rates, then that doesn't allow the marketing team to efficiently communicate that message or effectively communicate that message.

What we see is the most successful organizations, which are some of our top brands here in California that are working with us, it's because they've incorporated a data-driven mindset through marketing, through sales, certainly through their executive leadership team, through every department really. It shouldn't be in these silos of information at camp. I personally have not seen any of these large organizations that only one part of the organization is making use of data or thinking in a data-driven mindset.

Blaine: Do you think that comes top down? Do you think it's really the executive being data minded? Or do you think that it's something that comes bottoms up? How can a company start to ingrain that in their culture?

Jocelyn: I think generally it comes top down. However, I see a lot of these really savvy, highly motivated, passionate people that are not executive level, but a manager, a director that are coming in and that are educating some of these more legacy executive teams and helping them understand the new way that the world is working. I think a lot of this is up to an individual being really passionate and educating the rest of their team on the power of what it can do for the company.

It can just be one individual regardless of where they sit in the org. But in general, yeah, I do see it come from top down. But our industry also has attracted a lot of these really smart, passionate people that I'm seeing it come from bottom up as well but that’s less common.

Blaine: Yeah. Those cannabis killers. I love when they come from within the industry, the OGs that are just stepping up their game and over-performing. I think those are the under appreciated people in the industry. There's so many of them, I'll see them at a company and it's just like, “Wow, you are so much more essential for this organization than even they realize.” It's just so cool what they do.

Jocelyn: Oh my gosh, absolutely. I just love our community. Honestly, working in the cannabis industry, it's not a job to me at all. I mean, it's just my life. I'm certainly not in a 9:00 to 5:00 job, but yeah, we see these really well-known thought leaders that aren't at an executive level per se, they're not running the org, but they're just so passionate about this plant and about what it can do for our society as a whole, that they're just hustling all day long. I think it is so inspiring. I mean, it's really inspired me. It's why I'm trying to do the same thing because I realized that one person really can make a difference.

Blaine: I completely agree. Cool. That was an awesome point to end on. Last question before you go. I'd love to know, I think you already hinted on it, what is your favorite way to consume or favorite product in the cannabis industry?

Jocelyn: Well, I am a purist in general and so I'm a flower girl. I love to feel the flower. I want to grind it myself. I want to pack a bowl myself from a bong or roll it, though I'm not great at rolling. I like pre-rolls. I like joints. That's my preferred way. I have a Banana Bros device. I don't know if you've ever seen one of those, where it electronically grinds and then packs the joint for you. I love that. I love innovation and technology on that front as well.

But I like pre-rolls because I am a creative and social and spiritual consumer. I do not use cannabis for any medical reason. I use it for recreational, but primarily when I consume, it's because I want to get into a more conscious state to do creative activity. I really like to play guitar or I like to do photography. I like to write. For me, cannabis puts me in that space, but in order to get there, I believe in the pure form of it.

It's not the same for me having an edible or a beverage and then doing those activities. It's like including cannabis and a part of my creative process. Working with the flower is important to me in that part of the process.

Blaine: Yeah. It feels like a connection to the plant itself almost. Totally agree. I guess I'm a flower boy on my end. I like flower a lot. By the way, I’m pre-rolls. If you ever need to get a lesson on learning how to roll joints, feel free to connect with one of our employees, Angie. She is a master joint roller. She’ll definitely love to teach you. Awesome, Jocelyn. Thanks so much. Feel free to drop any ending remarks, but this is awesome having you and excited to have you in the industry. Thanks for coming on the podcast.

Jocelyn: Cool. Thanks, Blaine.

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